The majority of sole traders are aware of their obligations to register for VAT when their business turnover has gone over a specific limit – called the ‘VAT threshold’ (currently £70,000), but few realise that it is not their ‘business’ that is registered but them personally.
Why does this matter?
Where an individual carries on only one trade it generally doesn’t. The trap arises where a sole trader carries on one or more smaller businesses in addition to their main trade.
While VAT may be property accounted for in the main trade, few sole traders realise that because they are the ‘taxable person’ they must account for VAT on all sole trade income, regardless of from which business it has arisen.
This misunderstanding can lead to numerous VAT complications including missing VAT registration deadlines and the under declaration of VAT.
If this is a concern please contact Jamie Hooper ATT CTA